Working Paper: NBER ID: w13453
Authors: Hanswerner Sinn
Abstract: This note generalizes the Solow-Stiglitz efficiency condition for natural resources to the problem of fossil fuel extraction with a greenhouse effect. The generalized optimality condition suggests that the greenhouse effect implies overextraction in the sense of leaving future generations a wrongly composed wealth portfolio with too few natural resources relative to man-made capital. This judgment is independent of society's ethical preferences concerning the well-being of future generations.
Keywords: fossil fuels; greenhouse effect; Pareto optimality; resource extraction
JEL Codes: O13; Q32; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| greenhouse effect (Q54) | over-extraction of fossil fuels (L71) |
| over-extraction of fossil fuels (L71) | decrease in natural capital (Q39) |
| marginal product of natural resources (Q39) | level of carbon dioxide emissions (Q54) |
| level of carbon dioxide emissions (Q54) | overall economic output (E23) |